Millennium Post

Bidding for the orient

The Orient Express is in the news. For sure, this is not a train, although there was a train of that name running in Europe between Paris in France and Istanbul in Turkey during the 1920s and 1930s. The train was made even more famous by the detective story writer Agatha Christie in her Murder on the Orient Express.

The story was so gripping that later on it was made into a film. The Orient Express train had a chequered history including a role in European relations. One of its resplendent coaches was used by the victorious allies after the First World War to sign a peace treaty with defeated Germany. The same coach was used by Hitler to force another treaty when Germany won over the allies initially during the Second War.

The name of Orient Express was picked up by a successful businessman for his international hotel chain when he started one after buying up a small hotel in 1977.

Since then, he was able to give it the aura of a super luxury hotel chain offering great upper-class value to its patrons.

The Tatas have been trying to buy up this hotel chain for the last five years. It has now put in a $1.86 billion bid to buy all its outstanding shares at a 40 per cent premium. Some of the board members have been reported to have said that with the present offer, it was difficult to reject.

When the Tatas mounted their first bid to acquire Orient Express group of hotel chain, they were rebuffed with sneering remarks. The Orient Express management had then stated that any association with Indian Hotels Company Ltd, the corporate entity which owns and runs the Taj hotels, including Taj Mahal Hotel in Bombay would bring down its high end value.

The Bombay Taj Mahal Hotel was set up by the founder of the Tata group, Jamshetji Nusserwanji Tata in the first decade of the 20th century when he felt peeved that no good hotel in India was owned and operated by Indians where Indians had equal rights as Englishmen. Over the years, the Taj Mahal Hotel in Bombay has emerged as the epitome of Indian hospitality. It incidentally, had also become a symbol of defiance of Indian society against terrorism and terrorist attacks on India.

Nevertheless, the Tatas were told that the ‘Indian-ness’ of the Taj hotels would detract from the value of Orient Express Group of hotels in case Tatas were allowed entry into the company. By now, Tatas had already bought over seven per cent of the stock of the Orient Express hotel chain. Faced with staunch opposition, Tatas had sold a small part of their holdings subsequently.

However, in its renewed bid, Tatas are being aided by a former chief executive of the Orient Express hotels. It is also in league with one of the bluest of blue bloods of European business – the Montezemolo family which owns the racing car Ferrari. Its investment fund Charme II has agreed to invest $100 million in the bid for Orient Express.

Over a century old house of Tatas has a penchant for high end global brands of historic value. Earlier, Tatas had bid for Corus Steel one of the most prestigious high value special steel makers of Europe. The take over bid also involved a lot of sniggering reaction from European businesses. Notwithstanding those comments, the Tatas finally clinched the deal to take over Corus Steel, paying some $12 billion, and absorbed it into Tata Steel.

Emboldened by the success of integrating Corus Steel, Tatas mounted a bid to take over one of the highest brands in Europe – Jaguar and Land Rover, unique car maker. Jaguar and Land Rover – JLR – for short had before that changed hands several times among leading western automobile makers, including the Ford Motor Company. However, none of them had been able to turn around JLR and the company’s performance remained such that every new owner lost heavily on account of JLR.

Tatas took over JLR after much wrangling and JLR is now one of the most successful brand rehabilitation story in the global automobile industry. JLR, after take over by the Tatas, had improved its product design, gave it a new modern face and like the springing Jaguar logo of the company, its performance is also showing an extra pitch.

The Orient Express hotel chain may not be in the best shape currently, going by reports. Several stake-holders have complained about its handling of its assets. Tatas could be a strategic partner to Orient Express and should be able to give a far higher value in upper end hospitality sector in the global market.

If the present bid fructifies, it would be a stunning gift of departing chairman Ratan Tata to the group. In his time, he has picked at least three of global business’ top notch mast-heads – Corus Steel, JLR and now the Orient Express, apart from others like Tata Tetley or other hotel properties in strategic locations.  It would be reverse colonialism in the business field. [IPA]
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